TECHNOLOGY AND MUSIC
iTunes Music Store and the Indie Artist

Up until recently, independent artists and labels often found themselves at a disadvantage. Music distribution and marketing was largely in the hands of major record labels in an offline world and dealt with issues of physical inventory and brick-and-mortar retail outlets.

However, this business model is being transformed, now that online music services like Apple's (Nasdaq: AAPL) iTunes Music Store (iTMS), Roxio's Napster and RealNetwork's Rhapsody have come to the fore.

Mike McGuire, research director at Gartner G2, observed that the tables slowly are turning as consumers adopt online channels for their music buying.

"The major record labels have held the reigns for years, and now their traditional intermediaries and control over distribution and inventory is evaporating and new digital intermediaries are popping up," McGuire said in a MacNewsWorld interview.

Leveling the Playing Field

Kevin Arnold, founder and CEO of digital distributor Independent Online Distributor Alliance (IODA), said that legal online music has removed geographic and genre boundaries for music buyers.

"This is an international business, and from a sheer availability perspective, independent music now shares the stage with major artists," Arnold told MacNewsWorld. "I cut my digital teeth at Listen.com and realized any online music provider including indie music would need a service like IODA."

According to Arnold, businesses like his are growing because they are critical both to the online music stores and the independent artists they serve.

"We handle the complete process, going to hundreds of indie labels and artists, managing the encoding of music for iTunes, copyright administration and royalty payments back to the labels and artists," he said.

The Impact of Digital Music

Alex Luke, director of programming and label relations for Apple's iTunes Music Store, said in an interview with MacNewsWorld that without digital aggregators like IODA, CD Baby and others, his group would never have been able to include independent label music on iTMS.

"We get content from all of these providers, and we would not begin to have the resources to go out and do individual deals with labels and artists," Luke said. "However, if an individual independent artist approached us, and [he or she] had potential, we would do a deal direct if it made sense."

For his part, McGuire said that one cannot underestimate the impact of the transition to digital on the major labels.

"This is absolutely a leveler for independents, in terms of availability. The advantage is that very few consumers know the label of their favorite artists. Now they can just get to the music easier," McGuire said.

Promoting Future Stars

One way lesser-known artists are receiving exposure is through internal promotions at Apple in the form of its "Free Download of the Week." Apple features the chosen download in its iTunes Music Tuesdays e-mail to iTMS customers and on the iTunes site itself.

Apple's Luke shed some light on how this process works.

"We have an editorial staff meeting every Thursday. Everyone is tasked with bringing in a song from an emerging artist and champions his or her artist. Then a vote is made," Luke said, adding that his staff takes the process very seriously.

For his part, Arnold said iTMS and other services are promoting music that was previously ignored either because of a lack of commercial appeal or limited distribution opportunities. At the same time, both online music stores and the major labels will have to do more to expand online marketing to consumers, Arnold said.

"Major labels still hold the noose tight on marketing and keep it offline," he said. "Online stores need to think about marketing tools and interfaces for artists and labels to use for promotion."

Making Music Convenient

Beyond the encoding and copyright issues, Arnold pointed out that making music more convenient and available is the ultimate goal of the potential online distribution offers.

"Our distribution channels are growing outside the United States as well, into Europe and Australia," he said.

In McGuire's view, distribution is central to digital music because it allows artists to skip traditional steps and costs in getting music to buyers.

"The record companies will have to adjust if consumers decide online is the most convenient way for them to buy music," McGuire said. "Independents may gain ground simply based on being fleet of foot and more flexible in negotiating deals for digital distribution."